Conclusion of construction agreements has significant impact for foreign employees.

The Confederation of Danish Industry and 3F Byggegruppen have concluded negotiations and reached settlement on a 2-year agreement. Agreement was reached on 7 March 2023, covering the Building and Construction Agreement, the Building Agreement, the Masonry and Masonry Workers’ Agreement, the Floor Agreement and the Industrial Agreement and applies to all employees in the construction sector.  

The conclusion means several changes to the current agreements, some of which will have significant impact for employers and in particular employers of foreign workers. A summary of the main changes are discussed in further detail below.

Wages and wage components

Pursuant to the agreement the minimum wage will increase by DKK 4.50 as of 1 May 2023 and then by a further DKK 4.50 as of 1 January 2024. Additionally, wage rates for apprentices will increase by 4.5% in 2023 and 3.5% in 2024.

The contribution for public holidays, floating holidays, additional holidays for senior employees and childcare days will increase by 1.8% from 12.9% to 14.7%, this is calculated on the employee’s holiday eligible pay.

Pension

One of the significant changes of the agreement is the change to pension contributions, whilst the total pension contribution remains at 12%, the composition of employer and employee contribution will change. Pursuant to the agreement from 1 June 2023, the employer’s pension contribution will be increased from 8 to 10 per cent, while the employee contribution will be reduced from 4 to 2 per cent.

Housing allowance for foreign employees

A further significant change for companies employing foreign labour in Denmark is the introduction of a housing allowance. The housing allowance will be payable for employees who are not resident in Denmark at the time of employment or the start of the posting. The housing allowance will be DKK 25 per hour for those employees who receive minimum wage according to the relevant CBA. The housing allowance will be payable for the first four months in Denmark, regardless of whether the employer provides accommodation. The period for payment increases for up to 12 months if the company does not provide accommodation for the employee.

There is however no obligation to pay the housing allowance where the employee’s hourly wage exceeds the minimum payment rate plus the housing allowance.

3F have introduced this concept to try and put an end to foreign construction workers earning minimum wage where their Danish counterparts are paid significantly more.

The housing allowance payment will come into effect on 1 January 2024.

This payment could have a significant impact on companies using foreign labour in Denmark and this additional cost should be factored in when tendering for work.

Other changes

In addition to the above there are new rules on paid maternity leave, the agreement means that the father/co-mother has been earmarked for an additional 2 weeks of paid leave, and the parents have also been given an additional 2 weeks of paid leave that can be shared between them. The maternity leave will be paid by the company based on the employee’s salary subject to a cap of DKK 225 per hour.

In addition, there is the possibility of agreeing a 4-day working week if certain conditions are met.

The agreement also seeks to strengthen local co-operation, by giving the union better access to meet with new colleagues, and in general no obstacles should be put in the way of the organization of employees. In addition, the election of union representatives may take place during working hours.

When do the changes take affect?

The new agreements will not enter into force until both the employee and employer organisations agree the conciliator’s proposals for agreement by vote. Companies will not have to comply with the new rules unto they have been adopted, and therefore the current agreements for 2020-2023 apply.

Companies will only have to adopt the new rules and rates once all collective agreements have been adopted. Until then, the agreement applies for 2020-2023.

Adjustment of salary, allowances, etc. must take place as of 1 May 2023 and when the new collective agreement has finally entered into force.

The new agreement could have significant financial impact for companies and if you want further advice on the new arrangements, please get in contact with Mette Klingsten Law Firm for further advice.